Tuesday, August 03, 2010

Economic security

In explaining the divisions between Democrats/liberals and Republicans/conservatives, I've often focused on cultural, regional, and racial divisions. This is because I fundamentally don't buy the story that the liberal-conservative divide is all about "rent-seeking" (i.e. wealth redistribution) - poor Democrats trying to use the government to steal money from rich Republicans, or vice versa. There's too much evidence against that view, in particular the fact that most poor people don't vote. So I've tended to buy into the idea that political ideologies and parties are held together by tribalism.

But every once in a while, I am led to question this view. This blog post by Matt Yglesias contains a very interesting graphic that makes me wonder if deep economic incentives really might be responsible for a lot of the liberal/conservative divide:

Yglesias chooses to interpret this graphic in terms of the traditional "rent-seeking" explanation: business owners want favors and handouts from the government, so they vote Republican. But I think he's ignoring the other six panels. Why have "professionals" and "routine white-collar" workers tended Democratic over the last three decades, while both "skilled workers" and "non-skilled workers" trended Republican?

The answer that pops into my head is: economic security. Since 1980, our economy has become much less regulated, forcing firms to compete viciously to stay alive. since around the same time, globalization has gone into high gear, forcing massive continuing industrial restructuring as newly developed nations force their way into niches that U.S. firms used to dominate. Add to this the IT revolution, which is changing the very nature of work and eliminating the need for whole classes of workers on practically a yearly basis, and you have a recipe for massive economic uncertainty and insecurity.

I believe that it is this insecurity, more than rising inequality or decreasing mobility, which is driving Americans' discontent. Inequality as such doesn't bother us very much, and decreasing mobility has yet to really enter the public consciousness. But uncertainty - the daily fear of being downsized at any time, and behind that the vast looming terror of being made irrelevant by changing technology and trade patterns - is something that dogs each of us every day of our lives.

So how do we respond to inequality? I see two basic possibilities. The first is for us to respond as individuals - we "rise to the challenge," work hard, adapt our skills, and learn how to get by in ever-changing circumstances. The second option is for us to respond as a collective, seeking protection from the government in the form of industrial policy, trade protection, and government jobs.

I am guessing that people who choose the first option tend to vote Republican, and people who choose the second tend to vote Democratic.

Why does this make sense? After all, as Yglesias points out, Republicans often use government to benefit specific friendly firms (think: Halliburton); he might have also mentioned that much Republican-backed military spending is just corporate pork for defense contractors. So it is not immediate apparent that Republicans are the party of individual adaptability and Democrats are the party of collective economic security.

Still, looking at the breakdown in the graphic, as well as other things I know about voting patterns, it seems clear to me that the groups tending Democratic are either those most under threat from economic insecurity (traditional "routine white-collar" workers) and those most dependent on the government for their security (govt. workers, and also professionals, who are protected by govt. licensing). The groups who have chosen to go with the economic flow - entrepreneurs and "skilled workers" - are those that have shown the greatest trend towards the GOP. It is not clear why, but people seem to think that the Democrats will use the government to protect them against economic uncertainty, while the Republicans will give them free rein to adapt on their own.

Why this is, I'm not sure. The Democrats have not been more vocal in supporting entry restrictions for the professions, nor have they been particularly protectionist on trade. They have shown little appetite for re-regulating the industries deregulated under Reagan. Meanwhile, the Republicans offer hundreds of billions in defense contracts and corporate pork. Perhaps the divide comes down to pure rhetoric - Republican paeans to "small business" and economic individualism vs. Democratic reminders of the importance of government. Or maybe people believe that if and when popular pressure for trade protectionism and industrial policy becomes strong enough, it will be the Democrats who will be the first to cave in and take action.

Whatever is going on here, though, I think there is a lesson for both parties: economic security is a much bigger issue than either Democrats or Republicans seem to realize. There are policies out there that would mitigate the insecurity without damaging our economy - portable pensions, tax breaks for worker retraining, vocational education, tax-exemption for unemployment insurance, and government-sponsored job-matching programs, to name a few. Encouraging geographic mobility by ending the tax break for home mortgage interest is a step that deserves attention. And, in my opinion, the government needs to take a good hard second look at industrial policy.

My guess is that these policies, and the accompanying rhetoric of economic security, is a gold mine of electoral support that is just sitting there waiting to boost the fortunes of the first party that seizes it. Of course, this blog post is pretty much 100% supposition and me going out on an intellectual limb, so then again, maybe not.